FTC v. Intel.  Symbolically.

The Federal Trade Commission announced a formal investigation into possible anticompetitive conduct by Intel, which makes and sells 80-90 percent of computer brains in the U.S.  The unveiling, per the NYT, follows months of stalling by the former top FTC Commissioner, who now works as general counsel at Procter & Gamble.

The probe appears to focus on Intel’s rebating and discounting practices (as competitor Advanced Micro Devices alleges in a separate lawsuit).  According to the NYT article:

A.M.D. has asserted that Intel offers rebates and discounts that, in effect, result in its chips being sold at prices below the cost of production, a practice that some courts in cases involving other companies have said can be a violation of antitrust law.

Intel denies that its discounts and rebates drive its prices below cost, or at predatory levels. Intel has said that it offered legitimate discounts based on the volume of chips that have been purchased by companies, and that consumers benefit when personal computer manufacturers — using the discounts — are able to lower the cost of making their products.

The story also notes that Intel, AMD, and several PC-makers that buy microprocessors from Intel and AMD got FTC subpoenas recently.  The Commission’s website, including the Bureau of Competition’s home webpage, makes no mention of the investigation as of mid-day today.

In 1998, the Commission charged Intel with antitrust violations through disciplining of customers that tried to enforce their patent and other intellectual property rights in microprocessor technology.  The FTC’s 10-year-old administrative complaint said:

Intel has engaged in exclusionary conduct by cutting off and threatening to cut off valuable commercial relationships with certain of its customers as a means of coercing licenses to their patent rights in rival microprocessor and related technologies.  In each instance, Intel’s conduct had a significant adverse effect on the ability of the targeted customer to develop and bring to market in a timely manner computer systems based on Intel microprocessors, and would have posed a more significant long-term threat to the businesses of those customers if they had not agreed to license their technologies to Intel or, in the case of Intergraph, won an injunction against Intel’s conduct. Because patent rights are an important means of promoting innovation, Intel’s coercive tactics to force customers to license away such rights diminishes the incentives of any firm dependent on Intel to develop microprocessor-related technologies. Because most firms who own or are developing such technologies are vulnerable to retaliation from Intel, the natural and probable effect of Intel’s conduct is to diminish the incentives of the industry to develop new and improved microprocessor and related technologies.  Consequently, Intel’s conduct entrenches its monopoly power in the current generation of general-purpose microprocessors and reduces competition to develop new microprocessor technology and future generations of microprocessor products.

Complaint ¶ 39, In the Matter of Intel Corp., No. 9288 (F.T.C.).  The Commission and Intel reached a settlement in March 1999.

The AMD complaint, which it filed in 2005, alleges that Intel engaged in a wide range of anticompetitive conduct, including:

• forcing "major customers into exclusive or near-exclusive deals,"
• conditioning "rebates, allowances and market devvelopment funding on customers’ agreement to severely limit or forego entirely purchases from AMD,"
• establishing "a system of discriminatory, retroactive, first-dollar rebates",
• threatening "retaliation against customers introducing AMD computer platforms,"
• establishing and enforcing "quotas among key retailers effectively requiring them to stock overwhelmingly, if not exclusively, Intel-powered computers",
• forcing "PC makers and technology partners to boycott AMD product launches and promotions," and
• abusing "its market power by forcing on the industry technical standards and products which have as their central purpose the handicapping of AMD in the marketplace."

Complaint ¶ 2, Advanced Micro Devices, Inc. v. Intel Corp., No. 1:05-cv-00441-JJF (D. Del. June 27, 2005) (available on PACER).

Can you say predatory pricing?  The FTC probably will have to.